There are several different types of life insurance products available. The most common include:
Term Life Insurance
Term life insurance provides the largest death benefit for the least amount of premium, and is designed to protect you for a specific period of time. Typically, term policies are available from 10 to 30 years depending on your age at application time. Term coverage is designed with guaranteed premiums and face amounts for the specific term length. Often overlooked, most term policies are convertible into permanent coverage with the same carrier without evidence of current insurability. Common uses for term coverage include family and income protection. Business uses include buy-sell funding and loan protection.
Universal Life Insurance
Universal life insurance is the most popular form of permanent life insurance, and is characterized by its flexible premiums and flexible face amounts. While universal life can build cash value, it is often designed with both guaranteed premiums and guaranteed death benefits which last for the insured’s lifetime. Because it can be designed without cash value, it is generally the least expensive type of permanent coverage.
Whole Life Insurance
Whole life insurance is another form of permanent life insurance that lasts for the insured person's lifetime, provided the premiums are paid as specified in the policy. Whole life insurance can build cash value. Typically, a whole life policy pays interest on cash value, and may also pay a dividend depending upon the insurance company’s structure. Whole life policies can be effective for wealth transfer and other estate planning uses.
Survivorship Life Insurance
These policies, often called “2nd to die” insurance, are designed to pay a single death benefit upon the demise of the last survivor. Most often used in situations where estate tax will be due, it can provide liquidity to an estate where assets may not be readily saleable. Survivorship life insurance is most often used in conjunction with more sophisticated estate plans, and to fund irrevocable trusts.
Specialized Insurance Products
When a possible loss exists, there is usually some type of insurance coverage to mitigate or remove the risk entirely. Among these are so-called “final expense” or “burial” policies designed as their names imply; to pay minor debts and funeral expenses. These policies are generally whole life, and purchased in relatively small amounts. They can be very expensive if they are purchased at older ages.